How to design a Purchasing Process Part 2

In the first part of this series (How to design a Purchasing Process Part 1) we looked at the traditional purchasing process, in this article we'll take a look at what role technology has in shaping processes.

Contemporary Purchasing Process

Where information systems are prevalent much of the authorisation and communication methods that are present in the traditional process can be automated or abolished. Management Information is also more widely available (and of better quality) and enables the organisation to move towards Automated processes which rely more on exception management rather than transaction management.

The resultant culture is therefore one that focus's more on Supplier Relationship Management and a long term approach that one that focuses purely on Transactions.
Example of modern purchasing process

* Modern ERP systems monitor inventory and trends and automate requisitions based on forecast need
* Automated workflow and approvals engine route requirement to be authorised (where applicable)
* Where formal orders are required suppliers informed electronically either as part of established B2B network or via electronic message. Supplier acknowledgement and changes to terms updated in realtime.
* For low value or less complex commodities – a mixture of Procurement Cards and online catalogues can be used negating the need for formal orders whilst ensuring that robust controls are still in place
* Use of barcodes/RFID speed up the delivery process, electronic messages covering proof of dispatch and delivery are transmitted by the ERP and stakeholders are advised in realtime
* Electronic Invoices are submitted and are matched by the ERP against the Purchase order and delivery and then routed for payment negating the need for human intervention. Where Procurement Cards are used – Transaction Management systems route and aide process activity

Systems can dramatically reduce the amount of paper documents within a purchasing environment while streamlining the process via use of workflow systems.

Summary

Purchasing Activity is usually responsible for significant amounts of businesses spend, it’s important therefore that processes balance risk and control – technology can be beneficial – automating processes, facilitating decision making and it’s prevalence within an organisation can have a significant influence over the structure of procurement process. Technology can also eliminate bureaucracy – streamlining processes and eliminating waste.

When Designing Purchasing Processes, consider the following
* How is the requirement identified
* What is the authorisation process within the business
* How will the organisation communicate with it’s supply base
* Is a tender process required?
* How are costs managed within the process
* Consider also where performance indicators/measures can be applied

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